Must a building have a manager - and whom to entrust management of your property?

Must a building have a manager - and whom to entrust management of your property?

In order to maintain the value of the property we own; we should properly take care of and maintain it. As a result, real estate management has evolved as a business, which seeks to preserve and enhance the value of the property. Properly managed property ensures comfortable and safe life of its tenants, and such properties are also more valuable in the real estate market.  

Buyers are more inclined to well-maintained buildings for two reasons. The first is, of course, that they will not expect unforeseen additional costs when making the purchase, and the second is that they can expect quality management to continue, thus protecting the investment.  

The following describes how this relatively new business is practiced in Croatia and how real estate management can be ensured. 


Legislative framework on real estate management 

Property management is governed by the Ownership and Other Real Rights Act. The law states that all co-owners of a building are required to participate in the management of the property and must designate a person to perform the duties of joint manager and establish a common reserve. This indicates that the co-owners are in a co-ownership community where they are required to take care of the property as a whole.  

In order to make it easier to take care of the property, they appoint the person who will take care of the building on their behalf. All co-owners enter into an inter-ownership contract to select a building manager, which contains the size of the co-ownership parts of the property, conditions and method of managing the property, information about the person who will manage the property, the scope of that person's business, conditions, method of collecting and disposing of the common reserve funds, name of the representative tenants, the conditions and manner of use of the common premises, appliances and land belonging to the building.  

After the conclusion of the inter-ownership contract, the co-owners are obliged to conclude a building management contract with the selected manager, which defines the obligations of the manager towards the co-owners and the obligations of the co-owners towards the manager. This agreement regulates the mutual relations between the co-owners and the building manager, with an emphasis on the content and scope of routine maintenance of the common premises and facilities of the building according to the annual and multi-annual maintenance program, undertaking urgent and necessary repairs, fees for the building manager, revenue and expenditure plan, the way of establishing common reserves and many other issues. 


Who can do the job of a property manager? 

A property manager can be a natural or legal person who is registered to perform real estate management activities. The law requires that every building must have a manager registered for the activity.  

One manager can manage one or more properties, and his authority is set out in a building management contract he has made with the property owners.  

For his work, the manager receives a fee that is calculated on the basis of the maintenance coefficient per square meter of usable area of all apartments and other premises of the building and is paid on a monthly basis based on the management contract to the transaction account of the building manager. 


Obligations and responsibilities of the property manager 

The property manager manages the property and the common reserve as the agent of all co-owners. The common reserve represents the joint property of the co-owner of the building used for the cost of maintaining the property.  

If the cost of maintaining the property in the current year is greater than the proceeds from the payment of the reserve, or when the co-owners do not wish to spend all the funds from the reserve of the building in order to have it for some possible current expenses, it is possible to take out a loan.  

Then, from the perspective of the funds paid into the reserve, repayment and possible interest of the loan are made. All co-owners are obliged to pay contributions for the cash reserve, the amount of which is determined by the building manager and arranges for its collection.  

In addition to managing the common reserve, the manager is authorized to pursue legal actions on behalf of all co-owners of the property because it represents the common interests of all tenants. It is obliged to carry out regular tasks in their interest, and to undertake extraordinary tasks only on the consent of all co-owners or a court decision. Some of the other responsibilities of the manager include performing periodic and annual inspections of the property, securing common premises and devices at risk, taking out loans to secure additional funds to cover the cost of maintaining the building, renting and cancelling the use of independent premises in the building, etc.  

The property manager regularly informs the co-owners of the building, that is, submits to each co-owner an orderly account of the business in the previous calendar year and accompanying documents no later than 30 June each year. He is also obliged to make an overview of the anticipated tasks for the maintenance and improvement of the property, as well as the potential costs in the next calendar year. Part of the manager's job is collecting bids for maintenance jobs that are repeated at intervals of more than one year and for larger or more expensive work. 

The property manager must be in constant communication with the building representative. The building representative takes care of the building and reports breakdowns, necessary interventions, minor repairs, owner changes, and receives compensation for the work the amount of which is decided by the co-owners. 


How to choose the right property manager 

To comply with the law, co-owners are required to find a manager to entrust with the management of their building. Finding and choosing is not easy because it takes great confidence from all the co-owners that such an important job will be done properly and appropriately.  

We recommend that you first inquire about the person you would entrust with managing your property by inquiring about that person. It is good to know how much experience your prospective manager has in managing and performing such important tasks and how successful and responsible he has been in executing them so far.  

For example, you can obtain information from the tenants of a neighbouring building, on the Internet, the manager's website. We also advise you to have a phone call with multiple managers before opting for one or contacting a local real estate agent to do it for you.  

The importance of choosing a good manager is security in your own home, especially when it comes to a holiday property where your presence is limited, and therefore the ability to intervene on the building itself is limited. The manager is responsible for repairing the building's faults and for taking immediate action. 


Consequences in case the building has no manager 

All buildings that have three or more apartments or other premises must have an organized way of managing the property. Otherwise, the law is violated. However, there are still buildings that should have a manager but do not have one.  

There are various reasons for this, above all uninformed or neglected and inability to reach agreement among the co-owners of the property.  

In cases where the co-owners do not designate a building manager themselves, the local government appoints a compulsory or temporary manager who will manage the building until the regular management contract is concluded. Then the co-owners are required to find a manager to whom they would like to entrust the management of their property. 


Benefits of hiring a real estate agency 

If you are unsure how to find the right building manager, you can contact your local real estate agency to help you to research the market and recommend some potential managers.  

Real estate agencies have real estate manager databases. In addition, they often have an insight into customer satisfaction, as they interact with tenants on a daily basis and can promptly answer questions about the quality of service provided by individual managers, which is often not an easy task for laypeople who have no interest in knowing this type of information.